If COVID has taught us one thing, it is the need and importance of having insurance to safeguard yourself and your family against such unforeseen crises. There are different types of insurance available these days in India for every one of your needs. Did you know that you can ensure a pencil too? Insurance comes at the cost of a premium that might seem a financial burden to pay every month, but it helps a long way in securing your future.
To drive home this point further, The All England Lawn Tennis Club that conducts Wimbledon has taken insurance against the pandemic in 2003 after the SARS virus outbreak happened. They have been paying a £1.5 million premium every year since then to hedge their losses during such pandemics in the future. Finally, in 2020, with the onset of the COVID-19 pandemic, Wimbledon had to be cancelled. The tennis club received £114 million last year owing to that insurance policy.
Here, we will talk about the types of insurance policies for the readers to get a clear idea of the differences that exist between these policies. Here it goes:
Insurance is broad of two types in India which are further categorized as mentioned below:
Life insurance is also of multiple types, which are as follows:
- Term Insurance
- Whole Life Insurance
- Unit-Linked Insurance Plans (ULIPs)
- Endowment Plans
There are multiple types of insurance under the general insurance category, which are defined below:
- Health Insurance
- Motor Insurance
- Home Insurance
- Travel Insurance
Let’s start with a detailed description of these insurance policies in detail to understand better what they are.
You must have heard of LIC and their agents from your elders; they sell life insurance policies only. These types of insurance policies protect the policyholder’s family in case of disability or death of the policyholder. The insured amount is given to the nominee or your family if something happens to you. These policies ensure financial freedom for your loved ones when you will not be there.
- Term Life Insurance: This insurance covers the policyholder till a certain age or term. You can opt for an amount of your choice, and based on that amount and the tenor of the policy; your premium amount will be computed. In these types of insurance plans, the insurance company does not pay anything if the policyholder survives the tenor of the policy. The premium amount is comparatively lower in term insurance plans because of no maturity value.
- Whole Life Insurance: Such insurance policies are conventional as they cover the whole life of the policyholder. Whole life insurance is not for a specified number of years. The insured amount is paid as a death benefit to the policyholder’s family. There is a maturity age for this policy, and that is 100 years, post which this plan will become endowment.
- Unit-Linked Insurance Plans (ULIPs): ULIP is a modern and currently trending product that offers policyholders insurance plus investment returns. This is thus an ideal blend of risk-averse investors who also are looking for insurance coverage. In these types of insurance plans, a portion of your premium goes towards equity and debt investments, and the remaining amount goes towards the insurance cover. The investment in securities here is also based on your financial goals and risk-taking capacity.
- Endowment Plans: They are similar to ULIPs in nature, which offer the dual benefit of death cover and regular savings to the policyholder. This savings helps the policyholder to get a lump sum amount at maturity of the endowment plan. In these types of insurance policies, the nominee receives the complete insured amount on the policyholder’s death. If the policyholder survives till maturity, then a complete amount is given to him.
There are many other types of insurance plans as well under this category of life insurance. These are pension plans, money back plans, child plans, savings plans, protection plans to name a few.
This is the second major category in the types of insurance policy that covers all the non-life insurance policies available. These policies are ephemeral with quarterly or yearly tenures before maturity. They can, however, be renewed once it expires. Let’s look at some of the general insurance policies. Here it goes:
- Health Insurance: Health insurance is of paramount importance in a world where obesity and depression are common The different types of insurance plans under health insurance cover the medical and other healthcare expenses of the policyholder and his dependents. The insurer pays the cost incurred in medical treatment during an injury or illness. Many costs and critical illnesses are being covered in health insurance schemes these days.
- Motor Insurance: Motor insurance or vehicle insurance provides assistance to the policyholder if his vehicle gets damaged in an accident, theft, or any such physical damage. Damages due to a third party are also covered in some policies. There are different types of insurance policies here in the likes of bike insurance, car insurance, commercial vehicle insurance, etc.
- Home Insurance: Home insurance is similar to motor insurance except for the difference that the former safeguard a house and the latter insures a vehicle. These types of insurance cover your house from any theft, fire incidents, natural calamities, weather conditions like floods or tornados, etc. Man-made disasters like riots, explosions, and strikes are also covered.
- Travel Insurance: These are very short-term policies that ensure the financial safety of you and your family while you are going on a vacation. These types of insurance policiesare also offered by travel aggregators and railway booking portals. It protects you from loss of baggage, train or flight cancellation, medical emergencies while travelling, loss of wallet or passport, etc.
There are many other types of insurance schemes as well under the umbrella of general insurance, in the likes of fire insurance, property insurance, mobile insurance, marine insurance, to name a few.